GoM to decide policy issues on SSI Sector

Prime Minister, Shri Atal Bihari Vajpayee has entrusted to Home Minister, Shri L.K. Advani settling of the contentious issue of dereservation of items earmarked for the small scale sector, which has triggered sharp differences between commerce, textile and ssi ministries.

A high-level inter ministerial group under Shri Advani has been set up to settle policy issues, including selective dereservation and formulate a road map to strengthen the ssi sector.

This is necessary for enabling a phased and orderly transition of the ssi sector to face competition in an era of international competitiveness.

The GoM comprises finance minister, Shri Yashwant Sinha, commerce and industry minister Shri Murasoli Maran, textiles minister Shri Kanshiram Rana, Deputy Chairman of Planning  Commission, Shri K.C. Pant and ssi minister Smt. Vasundhara Raje.

The GoM is also mandated to propose an integrated policy for the ssi sector, particularly in the light of removal of quantitative restrictions and consequent increase in global competition

Traditional goods to be branded as Khadi

The ministry of small scale industry and rural and agro industries has drawn up a plan to market traditional Indian products under a common brand - ‘Khadi’.

The Khadi and Village Industries Commission (KVIC) has applied for the registration of the brand name in Mumbai.  

Steps recommended to ease credit flow to SMEs

The Study Group Panel on small enterprises headed by the Planning Commission Member, Shri S.P. Gupta has suggested improvement in the credit flow to the small, medium and tiny enterprises through a reduction in the lending rate and creation of funds like incubation fund and promotion of venture capital.   The proposals of the Group are as under :

  • Setting up of incubation venture fund of Rs.1000 crore during the 10th Plan period.
  • The common support fund for clusters to be created with support from the Central Government, SIDBI and associations formed by units in the cluster.
  • For financing of tiny and village enterprises, the lending rate to be brought down from PLR + 3% to PLR + 2.5%.
  • Equal treatment to be given to small scale industry as that provided to agriculture.
  • Limit of waiver on collateral should be increased from Rs.5 crore to Rs. 10 crore.
  • Setting up of specialised branches for small scale industry units.
Credit Guarantee Fund Trust

The government is setting up a Credit Guarantee Fund Trust with an initial corpus of Rs. 125 crore of which Rs. 100 crore will be contributed by the ministry of small scale industries and agro and rural industries, and the rest will be provided by the Small Industry Development Bank of India (SIDBI). 

Loans up to Rs. 10 lakh can be covered by guarantee from the trust.   Such loans will be available without collaterals.

The recent Shri S.P. Gupta report had also recommended raising of the limit of waiver of collateral for loans upto Rs. 5 lakh to Rs. 10 lakh. 

Global Trust, IFC in pact to aid small units

The International Finance Corporation (IFC) and India’s Private Sector Global Trust Bank (GTB) on 07.08.2000 announced establishment of a $ 40 million facility to provide rupee as well as US dollar loans to the domestic small and medium enterprise (SME) sector, meant to help SMEs in the country which have limited access to long term project finance, especially if they require local currency funding.

Rs. 5,000 crore fund soon for SSI tech development

The proposed technology upgradation fund for the small scale sector will have a corpus of Rs. 5,000 crore and the guidelines are expected to be finalised by end August, according to a senior official in the SSI ministry.

The Planning Commission and the ministry will specify the technologies to be acquired for the export-oriented sectors.   And then, cheap funds will be made available to units in the specified sectors for purchasing new equipment for technology upgradation.

The development fund, which will be similar to the textile upgradation fund, will be operated through  SIDBI.

This would be in addition to the recently cleared credit guarantee fund for small industries with a Rs. 125 crore corpus, the sources said, adding that the CGFSI would begin functioning from July 15, 2000.  

Package of Incentives for SSI Sector

At the first national seminar on small scale industries sector held at New Delhi on August 30, 2000, Prime Minister, Shri Atal Bihari Vajpayee announced a package of measures to gear up the small scale industries sector.   The highlights of the package are as under :-

(1) An increase in excise duty exemption limit from Rs. 50 lacs to Rs. 1 crore.

(2) The Handloom Sector will be supported by a Scheme called Deendayal Hathkargha Protsahan Yojana which will be jointly implemented by the Centre and the state.

(3) An increase in limit for composite loans from Rs. 10 lacs to Rs. 25 lacs in a bid to increase credit flow to the SSI sector.

(4) Industry related service and business enterprises with maximum investment of Rs. 10 lakh will be eligible for priority lending.

(5) A group will be set up to recommend within 3 months means of streamlining inspection.   At present, a single point unit is subjected to a minimum of 37 inspections and 52 laws and has to fill 116 forms and registers.

(6) Capital subsidy of 12% for investment in technology upgradation in  select sectors.   An inter-ministerial committee of experts will be set up to define the scope of technology upgradation and sectoral priorities.

(7) Government will continue with the policy of granting Rs.75,000 to each small scale unit that obtains ISO 9000 Certificate during the next six years.

(8) There will be one-time capital grant of 50% to SSI associations that wish to develop and operate testing laboratories of international standard.

(9) A fresh census of small industries will be conducted and the census will also cover industrial sickness and its causes.

(10) Launching of a credit guarantee scheme to facilitate the required flow of funds to the SSI Sector. 

  • The system of subsidy for the tiny, small and medium sectors should be graded, with the tiny sector getting the maximum amount of subsidy.
  • Selective de-reservation on items ear-marked for SSI sector subject to an export obligation of 30% recommended.
  • A three-tier definition recommended putting an investment limit of Rs. 10 lakh in plant and machinery.
  • Units with investment limit of Rs. 1 crore and Rs. 10 crore to be defined as medium scale units, with 10 lakhs to Rs. 1 crore to be small scale units and below Rs. 10 lakhs to be tiny units.